Читать книгу Leveraged Buyouts - David Pilger - Страница 9

One of the major advantages of leveraged buyouts is the smaller initial equity investment required to close a transaction. In our example $100 million transaction above, the investor would be required to put up the full $100 million to acquire the company. However, in the case of the leveraged buyout, the investor would only need to hand over $10 million dollars to get the deal done. The other $90 million, we are assuming, could be obtained in the form of a loan secured by the assets of the company being taken over. (We are assuming the company has limited debt prior to any transaction.)

The point is, if the investor did not have $100 million dollars, without leverage the investment would have been out of reach. Leverage allows the transaction to close with only a fraction of the upfront equity commitment. Now an investor can be the proud owner of a $100 million dollar company, even if he only has the ability to invest $10 million.

Alternatively, let’s say that the investor does have the $100 million. Rather than tie up the entire $100 million in this one investment, she may want to invest in several different investment opportunities. Using leverage allows her to do that. Our rich investor may wish to invest $10 million in our example opportunity as well as invest in nine other $10 million opportunities. By using leverage, our savvy investor has invested the entire $100 million dollars, but has diversified her risk across several different investments.